Brog out of Gyrodyne contest?

Today's the day of the Gyrodyne annual meeting. Phil Goldstein and his "Bulldog" hedge fund are seeking to put Mr. Goldstein and an ally on the Gyrodyne board.

They have at least two leading complaints about management, which they hope they'll be able to address when on the board. First, that Gyrodyne (a manager of commercial real-estate) has a claim against the state of New York in regard to an eminent domain issue but hasn't avidly pursued the matter. Second, that Gyrodyne's board has entrenched itself at the expense of shareholder value with a "poison pill" by-law, and the new board members, if Bulldog is successful, will work for its revocation.

If you've been following my earlier posts carefully, though, you may be surprised that I've just spoken of Mr. Goldstein and "an ally" rather than "two allies." Originally, he was part of a three man slate Bulldog nominated for the board, along with Timothy Brog and and Andrew Dakos. But on Monday, Gyrodyne filed amended proxy materials with the SEC that indicate that its settled its difficulties with Timothy Brog, formerly the third man on the Goldstein slate.

"Mr. Brog has also withdrawn his consent to serve as a director if elected and the Company has dismissed its claim against Mr. Brog in the matter titled Gyrodyne Company of America, Inc. v. Full Value Partners L.P., et. al, No. 07-CV-4859. The Company and Mr. Brog have also agreed to mutual releases for claims arising out of the 2006 and 2007 Annual Meetings," the company says.

Who is Tim Brog anyway? When I first encountered that name in the Bulldog/Gyrodyne context, it had a familiar ring to it, but I didn't have the chance to run that down.

Brog has proxy-slate experience. In August 2006 he was elected to the board of directors of bubble-gum marketer Topps as part of a negotiated agreement that resolved a proxy contest there. As a youth, back when I had dentition, I chewed many a stick of bazooka joe bubble gum, so it's unsurprising that his name had stuck (like cognitive gum) to my mind.

That said, I contacted Mr. Brog this morning. He tells me that the Gyrodyne filing is accurate. Also, he said that this doesn't represent any split in views between himself and Bulldog. One of the proxy-advisory services apparently has recommended that shareholders in Gyrodyne note for two out of the three members of the dissident slate. To avoid any scattering of the votes in response to that suggestion, Messrs Goldstein and Brog agreed that Mr. Brog would withdraw his name from consideration.

So things go in the fast-moving world of proxy contests. Ain't this great (though somewhat nerdy) fun?

Three brief items

1. Motorola, a Fortune 100 communications company, announced that Ed Zander is stepping down as its CEO.

Zander will remain as chairman of the board until May, when the company holds its annual meeting. Carl Icahn has said for at least a year now that Zander wasn't right for the CEO job. He put out a statement Friday crowing a bit. Zander's departure is "long past due" etc.

But Zander himself was never the focus of Icahn's efforts at Motorola. He believes the best way to increase the value of the stock for shareholders like himself is to split it up -- make it a company focused tightly on mobile devices and spin off everything else.

My guess at the moment is that the new CEO, Greg Brown, won't be on board with Icahn's agenda any more than Zander was.

2. Readers may recall that here on November 20 I blogged about proxy access rules under consideration by the SEC.

Since then, the agency has made its choice. Its adopted the most restriuctive of the rules under consideration. In other words, it holds that company's can simply exclude from the ballot any shareholder attempt to re-write the company's ruiles concerning elections to the board of directors.

In general, this is bad news, not just for the Carl Icahns of the world but for corporate productivity in the US. This ruling will encourage incumbemnt managemnents to entrench themselves and resist pressures from outside. Entrenchment, as a rule, is a bad thing. Shake-ups are ghood things. Capitalism requires that the pot be kept boiling.

Creative destructive works like that. Protect yourself from the latter, you minimize the former.

3. More about Gyrodyne and Goldstein. As I mentioned Wednesday, Gyrodyne brought a lawsuit in federal court asking for an injunction so that Goldstein couldn't ruin their party this week. Their annual meeting is Wednesday and they don't want him soliciting proxies to replace three of them on the board with himself and two associates.

It's an 8-member board, so even complete success in terms of his slate won't give Goldstein a majority. But his slate would need only 1 convert to produce a tie vote, and deadlock, on a given issue.

At any rate, it appears that the district court refused to grant the injunction, so the solicitations continue.

The big issue? Poison pills. I'll discuss such "pills" in general in tomorrow's entry.

What's a Gyrodyne

I recently encountered the name Gyrodyne, as that of the plaintiff in a lawsuit against Phillip Goldstein and Bulldog Investors. My reaction was that same as I imagine yours would be (given my conception of who "you" are -- a digression that you wouldn't want me to enter into either). Who or what is Gyrodyne?

I cared because the name of Phillip Goldstein is very familiar to me. I've covered some of the litigation in which he's been enmeshed. When the SEC sought to require hedge funds to register as investment advisers, most of the hedge fund industry thought this a small matter, a little added paperwork, much easier to comply with than to fight.

Goldstein fought. He contended that the SEC didn't have the statutory authority it claimed, and he pursued that question, successfully, to the US Supreme Court, destroying the registration mandate.

I saw Mr. Goldstein at a convention of activist investors in California last month, and the moderator of one particular panel in which he was a participant introduced him as a "libertarian hero."

When that moderator opened the floor to questions, I spoke very briefy to Phil Goldstein, not about the registration matter but about the idea of "empty votes," the hedging away of the real economic interest of shares to retain only their voting value. Some scholars have thought such a tactic to be a real threat to rational corporate governance, others have thought it a phantom.

That, then, was the gist of my question. I may discuss the "empty votes" controversy here another time. For now, let it stand only as evidence that I have followed Goldstein's career. For that reason, I care when I run across a lawsuit in which he's a defendant.

The plaintiff, again, is Gyrodyne Company. Who's that? Its the owner of some industrial and commercial real estate on Long Island, NY.

Goldstein is apparently waging a proxy fight to take over Gyrodyne's board of directors, on the ground that the company has depressed its own value through a "poison pill" discouraging potential acquirers.

Gyrodyne responded with a lawsuit in Manhattan federal district court last week, saying that Goldstein/Bulldog is using false and misleading proxy materials.

The following is directly from Gyrodyne's press release:

"We filed this suit ... to ensure that our shareholders receive complete and accurate information about the Bulldog group's interests, plans and motivations that is required by the federal securities laws....We will continue to take appropriate steps to protect the interests of Gyrodyne shareholders."

As kids of the playground, watching a fight develop, might say at this point: Ooooooo.

Gyrodyne's annual meeting is a week from today. I hope to come back to this before then.